U.S. health insurance sector, Cigna and Humana are reportedly in talks for a merger exceeding $60 billion. However, industry observers predict that the proposed deal will undoubtedly face stringent antitrust scrutiny, marking a potential challenge for the two major health insurers.
The discussions between Cigna and Humana come six years after regulatory obstacles thwarted previous attempts to consolidate the health insurance industry. In 2017, U.S. courts upheld antitrust challenges, prompting Cigna to abandon a $48 billion deal to acquire Anthem, now rebranded as Elevance Health. The legal setback also led to Aetna, now under the ownership of pharmacy chain operator CVS Health, abandoning a $37 billion deal to acquire Humana.
According to a source familiar with the matter, Cigna and Humana are exploring a stock-and-cash deal, with the potential agreement expected to be finalized by the end of the year. The Wall Street Journal first reported on the potential merger, signaling a significant development in the industry. While Humana declined to comment on the matter, Cigna did not respond to requests for clarification.
The prospective merger is expected to draw intense antitrust scrutiny due to the substantial market consolidation it would entail. If successful, the combined entity would boast a formidable scale, allowing it to compete more effectively against larger U.S. health insurance players such as UnitedHealth Group and CVS Health.
Cigna and Humana, with market values of $77 billion and $59 billion, respectively, currently have limited business overlap, primarily concentrated in Medicare plans for older Americans. Notably, Humana’s Medicare business significantly outpaces Cigna’s in both size and profitability. Earlier this month, Reuters reported that Cigna was exploring the sale of its Medicare Advantage operations, aiming to enhance investor confidence following disappointing performance.
Industry experts suggest that divesting from Medicare Advantage could potentially increase the likelihood of regulatory approval for the merger, as it would mitigate concerns over reduced competition in specific market segments. Nonetheless, the sheer size and impact of the proposed merger are expected to attract close scrutiny from antitrust authorities.